A joint mortgage holds all signers equally responsible for the mortgage payments. Getting out of a joint mortgage isn't easy, but it's possible. Whether you want off the mortgage because you need to reduce your debt-to-income ratio for a new property sale or because you are no longer feeling the love for your mortgage partners, it takes a refinancing and the cooperation of all the partners to get it done.
Discuss your desire to get off the mortgage with the other stakeholders. An open, honest discussion about your desire to bow out of the previously agreed-to plan can go a long way in getting the cooperation of the other parties. If your co-owners refuse to refinance, you cannot get off the mortgage. Therefore, it's important to think carefully before going into a joint mortgage agreement with anyone. There's also no point in beating around the bush if you're already in and want out.
Negotiate a Price
Decide on a buyout price. If you've been on the mortgage for a while or helped with the down payment, you may have equity built up in the property. Theoretically, you're entitled to take your equity with you when you go. Your partners may feel differently, however. In some cases, you won't have the option of negotiating a buyout. If, for example, the judge has awarded your ex-spouse the family home, he may decide what, if any, equity you get to keep.
If a buyout is in the cards, get the property appraised. The property's value today won't necessarily match what it was when you bought it. An appraisal allows you and your partners to come to a fair buyout price and moves things closer to a refinancing closing. Once the appraisal is complete, divide the equity by the number of partners to determine your buyout amount.
Grease the Wheels
Your lender approved your mortgage based on the income levels and credit scores of all the parties involved. Once they have you on the hook, they won't let you walk away unless someone else takes over the debt. The only way to do this is to refinance the mortgage in the remaining owners' names, which involves generating a new loan with its own fees and closing costs. To convince your fellow mortgagees to do this, offer to pay any closing costs on the refinance. After all, you're the one who wants out. A refinance costs money and may come in with a higher interest rate than the previous mortgage. Offering to pay all costs incurred in this process will go a long way toward convincing your partners to follow through.
Complete the Process
Once you've worked out the details with your fellow mortgage holders, it's time to get the deed done. Contact the lender and tell them that you want off the mortgage and that your partners have agreed to refinance. Discuss the cost, process and length of time it will take to complete the deal. You and your partners may want to discuss refinancing with several different lenders to get the best rate. Help your mortgage partners complete the process. Let them know you're willing to take care of any running, postage or other chores and costs associated with getting the deal done. Request the earliest closing date possible. You want to strike while the iron is hot and before anyone decides to back out of the refinancing agreement.
Further facilitate the process by attending the closing. Sign any papers asked of you that remove you from the previous agreement. Write a check for closing costs to a partner who in turn can write a check to the new lender. Remember to bring your keys so you can return them.
- Checking with several lenders to get the best rate for your soon to be former partners goes a long way in good will.
- If the partners refuse to refinance, you cannot get off the mortgage. Therefore, it is important to think carefully before going into a joint mortgage agreement with anyone.
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